Agreements. California Civil Code (1549) states that a contract is an agreement between two parties to do or not to do a specific thing. Simple enough, right?
From this basic idea, we have business contracts the size of books. On the other extreme, there are hard-working business people who leave matters to chance by not having any kind of signed agreement. Is it possible not to need a contract in today’s business world? To answer that, let’s learn about the basic types of contracts.
Expressed, Implied and Quasi Contracts
The expressed contract can be either oral or in writing. Any agreement in which two parties have specifically spoken or written and signed the terms is an expressed contract.
Implied contracts are established through past actions, and conduct. They are enforceable (or damages are recoverable) if a court finds that the facts of the circumstances support that both parties had consistent actions that established an implied contract.
Example: Let’s say John is throwing an impromptu party with his wife to celebrate a promotion. He orders 10 pizzas to be delivered at 7 pm. Closer to the party, he discovers his wife has instead ordered party trays from a more expensive café down the road to be delivered around the same time. John decides to call the pizzeria at 6:47 pm to tell them to cancel his order, but unfortunately, the delivery driver has already left. In this case, John is on the hook. Although he did not sign a legal agreement that he wanted all that pie, he did imply it ordering it.
This easily carries over to a business situation. There was a recent inquiry made to our office where a gentleman had taken the plunge to start a freelancing web design business. He landed a client and worked for weeks on the website for a reasonable price. When it came time to pay, the client demanded a multitude of changes. The freelancer obliged. At the end of the transaction, the client decided he didn’t want the website anymore. The client allegedly claimed there was no written agreement signed, so no harm was done.
Written agreements can apparently be an important psychological reminder to all parties what is agreed upon and fair. This is an implied contract, however, now the freelancer has to face the cost of litigation, which could be well over the amount in dispute.
Another famous example is the case of Desny v. Wilder. This case involved a writer in the 1950s who submitted a script idea to a publisher. The publisher used the idea without paying, asserting that there had not been a contract. A judge will look at the case and establish that the facts of the circumstance support that there was an understanding that Desny would be paid if the idea was used. In essence, judges will use common sense to determine if there was an implied contract.
Quasi Contracts
Finally, we look at Quasi Contracts. Quasi-contracts are not agreements made by two parties at all but rather imposed by the state. (By State, we mean ‘government’ or authoritative body.) This is powered by the idea of “Quantum Meruit”. Let’s imagine that a trucking company signs a contract with a retailer to transport goods. They’ve had a good working relationship for a few years, so after a while, they stop signing contracts after every agreement. After successfully delivering a shipment, the logistics team at the retailer realizes that have a small shipment of goods that needs to go to another store. Instead of going the official invoicing and all “official channels”, a member of management from the retailer calls a management member at the trucking company and asks that they take on the additional work. The trucking company discusses the project with the driver, and he’s onboard. Great, another small job for extra cash.
The trucking company invoices the retailer at the end of the month with the original project, plus the additional work. The retailer refuses to pay for the additional shipment because it was not agreed to in writing.
Quantum Meruit should enforce the equitable remedy. The trucking company should “get what it deserves.”